Published: Tuesday, May 14, 2013 at 5:20 p.m.

Last Modified: Tuesday, May 14, 2013 at 5:20 p.m.

As a legal dispute over the biomass contract continues, the city of Gainesville now is seeking an arbitrator to order the sale of the plant to Gainesville Regional Utilities.

When city commissioners voted in December to demand arbitration over an alleged breach of contract, the relief the city and GRU sought was the ability to make an offer to purchase the plant.

An amended arbitration claim filed in mid-April went further. Under it, the city does not seek only to make an offer to buy but to have an arbitrator order the partnership behind the plant, the Gainesville Renewable Energy Center, to sell the plant to the city.

Under the city's claim, the purchase price would be determined by what Starwood Energy, a Connecticut private equity firm that focuses on energy projects, paid to acquire its 40.3 percent share in late 2011.

At this point, the city has not been able to obtain from GREC information on how much Starwood paid for its stake, according to the arbitration claim.

Just as the demand for arbitration drew a counterclaim from GREC, the city's amended demand drew another request for dismissal and damages.

GREC alleges that the city has no interest in purchasing the 100-megawatt plant but is using arbitration in a "back-door effort" to renegotiate the 30-year power purchase contract to terms more favorable to the city.

GREC contends that potential tax equity investors, who would put money toward a project in exchange for receiving some of its tax incentives, have been "unwilling to move forward" because the arbitration claim was a "cloud hanging" over the plant. GREC claimed that the city's arbitration demand has caused it damage in excess of $50 million and seeks unspecified damages from the city.

The city's claim for arbitration involves Tyr Energy's late December 2011 sale of its stake in the plant to Starwood Energy. That came several months after Fagen Inc., the construction firm building the plant, bought a 17 percent stake.

City officials say the two transactions combined for a 57 percent change of ownership and a transfer of controlling interest that should have triggered the city's right of first offer.

A push to purchase the plant would represent a significant departure from the city's prior stance.

Approving the $3 billion, 30-year contract in 2009, city officials said that by purchasing power from a private firm instead of building the plant itself, the city would protect itself from construction risk and keep about $500 million in debt off the city's books.

With the arbitration ongoing, GRU and GREC officials would not discuss the matter in much detail Tuesday.

GRU General Manager Bob Hunzinger declined comment on how the city and ratepayers might benefit from the purchase of the plant or if any talks on the potential renegotiation of the contract were ongoing.

Hunzinger said he felt the city's effort to have an arbitrator order the sale of the plant to GRU was consistent with the right to make a purchase offer sought in the original arbitration demand.

GREC Chief Financial Officer Al Morales reiterated the company's stance that the two separate sales of ownership stakes did not constitute a change of controlling interest that would trigger the city's contractual right to make an offer to buy.

City Commissioner Todd Chase, who frequently has expressed concerns about the rate and financial impact of the biomass plant, declined comment on the specifics of the arbitration claim.

"We are continuing to look at all of our options, and that's the prudent thing to do," Chase said.

In April, William T. Allen, a law professor at New York University, was selected as the arbitrator for the case. Allen is the former chancellor of the Delaware Court of Chancery, which hears cases over mergers, acquisitions and other legal disputes involving corporations registered in the state of Delaware.

<p>As a legal dispute over the biomass contract continues, the city of Gainesville now is seeking an arbitrator to order the sale of the plant to Gainesville Regional Utilities.</p><p>When city commissioners voted in December to demand arbitration over an alleged breach of contract, the relief the city and GRU sought was the ability to make an offer to purchase the plant.</p><p>An amended arbitration claim filed in mid-April went further. Under it, the city does not seek only to make an offer to buy but to have an arbitrator order the partnership behind the plant, the Gainesville Renewable Energy Center, to sell the plant to the city.</p><p>Under the city's claim, the purchase price would be determined by what Starwood Energy, a Connecticut private equity firm that focuses on energy projects, paid to acquire its 40.3 percent share in late 2011.</p><p>At this point, the city has not been able to obtain from GREC information on how much Starwood paid for its stake, according to the arbitration claim.</p><p>Just as the demand for arbitration drew a counterclaim from GREC, the city's amended demand drew another request for dismissal and damages.</p><p>GREC alleges that the city has no interest in purchasing the 100-megawatt plant but is using arbitration in a "back-door effort" to renegotiate the 30-year power purchase contract to terms more favorable to the city.</p><p>GREC contends that potential tax equity investors, who would put money toward a project in exchange for receiving some of its tax incentives, have been "unwilling to move forward" because the arbitration claim was a "cloud hanging" over the plant. GREC claimed that the city's arbitration demand has caused it damage in excess of $50 million and seeks unspecified damages from the city.</p><p>The city's claim for arbitration involves Tyr Energy's late December 2011 sale of its stake in the plant to Starwood Energy. That came several months after Fagen Inc., the construction firm building the plant, bought a 17 percent stake.</p><p>City officials say the two transactions combined for a 57 percent change of ownership and a transfer of controlling interest that should have triggered the city's right of first offer.</p><p>A push to purchase the plant would represent a significant departure from the city's prior stance.</p><p>Approving the $3 billion, 30-year contract in 2009, city officials said that by purchasing power from a private firm instead of building the plant itself, the city would protect itself from construction risk and keep about $500 million in debt off the city's books.</p><p>With the arbitration ongoing, GRU and GREC officials would not discuss the matter in much detail Tuesday.</p><p>GRU General Manager Bob Hunzinger declined comment on how the city and ratepayers might benefit from the purchase of the plant or if any talks on the potential renegotiation of the contract were ongoing.</p><p>Hunzinger said he felt the city's effort to have an arbitrator order the sale of the plant to GRU was consistent with the right to make a purchase offer sought in the original arbitration demand.</p><p>GREC Chief Financial Officer Al Morales reiterated the company's stance that the two separate sales of ownership stakes did not constitute a change of controlling interest that would trigger the city's contractual right to make an offer to buy.</p><p>City Commissioner Todd Chase, who frequently has expressed concerns about the rate and financial impact of the biomass plant, declined comment on the specifics of the arbitration claim.</p><p>"We are continuing to look at all of our options, and that's the prudent thing to do," Chase said.</p><p>In April, William T. Allen, a law professor at New York University, was selected as the arbitrator for the case. Allen is the former chancellor of the Delaware Court of Chancery, which hears cases over mergers, acquisitions and other legal disputes involving corporations registered in the state of Delaware.</p>